High-Yield Stocks That Could Wreck Your Retirement: Macy’s (M)
Dividend Yield: 5.2%
I’d recommend you dump beaten-down retailer Macy’s Inc (NYSE:M). With a 5%-plus dividend, Macy’s is the sort of stock that will make an income investor sit up and take notice. It helps that it also fetches an unassuming 10 times next year’s expected earnings.
I actually think Macy’s would make a decent trade. To me, it looks like the “buy Amazon / short traditional retail” trade has come close to running its course for now. I wouldn’t be surprised to see Amazon take a breather and Macy’s enjoy a nice rally sometime this year.
But I absolutely wouldn’t fall in love with Macy’s or expect it to regain its former glory. Traditional retail really does face unrelenting pressure from Amazon.com and other internet retailers. And unless Macy’s figures out a new business model in a hurry, that 5.2% dividend will likely get cut at some point in the next few years.
I’m not sure how all of this shakes out.
Traditional retail won’t disappear completely. If nothing else, brands will need to rent mall space to showcase their wares. But it will be a painful transition to get to that point, and there will be casualties along the way. I don’t expect Sears Holdings Corp (NASDAQ:SHLD) or J C Penney Company Inc (NYSE:JCP) to survive the next recession.
Macy’s probably won’t go out of business, but I still wouldn’t want my retirement to depend on it.